Partners Hope CEO Change at Avnet Will Supercharge Cloud Investment

Partners are optimistic that making ex-Lenovo CEO Bill Amelio Avnet's interim leader reflects a commitment to doubling down on cloud and the Internet of Things.

But they painted a picture of a company at a crossroads that needs to do a better job of reaching out and listening to partners.

"I know who my point people are for Brocade, NetApp and Cisco," Kyle Rosenthal, founder and CEO of San Francisco-based Tack Tech, told CRN. "[But] I don't know who my point person is for cloud, [or even] if there is one."

[RELATED: Avnet Changes CEOs: Hamada Out, Ex-Lenovo CEO To Fill In On Interim Basis]

Amelio is replacing Rick Hamada, who stepped down Monday after leading the Phoenix-based distributor for more than five years. A company spokeswoman told CRN that Avnet's board of directors believed a change in leadership was needed to "drive a greater sense of urgency," and that the company expects to complete its search for a new chief executive within the next six months.

One partner who has visited Avnet's headquarters several times – but didn't want to be identified – said Hamada had been more focused on traditional hardware sales, while the board was looking to put more emphasis on cloud and services sales.

"Avnet's value to the partner is decreasing," said another source familiar with Avnet, who also didn't want to be identified. "They tend to be late adopters to our changing business models and in continuous holding patterns as they wait for internal and manufacturer change to take place."

One of Amelio's first priorities will be to focus on partner and supplier relationships, according to a second company spokeswoman.

"He will be listening closely to our partners and suppliers for all opportunities, especially enhancements to Avnet's strategic plans, organizational structure, and processes, that will help successfully grow their businesses," that spokeswoman told CRN.

Rosenthal said he would love to see someone at Avnet be placed in charge of reaching out to partners such as Tack Tech, specifically around the distributor's cloud offerings and services, and helping partners transition from hardware reselling to cloud-focused sales. Rosenthal said he has received pretty light feedback when he has approached Avnet about its cloud portfolio.

"I think there's plenty of opportunity for them to take the friction out of doing business," Rosenthal said.

But an executive at another solution provider said Avnet has been willing to invest in partners that are making the journey to cloud, offering them market development funds (MDF), sales performance incentive funds (SPIF) and incentives to hire new people, said Jamie Shepard, senior vice president of health care and strategy at Lumenate, of Addison, Texas, No. 152 on the CRN SP 500.

"Avnet is reaching back out to the channel partners that understand that [cloud] strategy," Shepard told CRN. "They're changing to the new world economy."

Avnet's channel model operated pretty flawlessly between 2007 and 2015, Shepard said, but the distributor has needed to re-engage with partners this year and drive net new solution offerings due to changes in the market landscape.

"People are buying less hardware," Shepard said. "There's a lot of restructuring going on inside the industry, and I don't think Avnet is immune to it."

A third source familiar with Avnet who did not want to be identified said the company's culture has changed pretty dramatically since 2012, or roughly a year into Hamada's CEO tenure. Since then, the source said, there have been fairly major changes in the organization every six months or so, with quality leadership leaving and internal moves made that lowered the quality of service.

Additionally, the source said many programs initiated by Avnet end up not going anywhere and get scuttled after a short period of time, despite partners sinking precious time and resources into them.

As a result, many value-added programs and services Avnet offered in the past no longer exist, the source said. But the source said the distributor still expects to earn the same margins as they did six or seven years ago back when those programs existed.

"The reasons for staying with Avnet have diminished over the years," the source told CRN. "They do not seem to care or listen to how it [the changes] affect partners."

The source is not optimistic that a change in CEOs will reverse Avnet's fortune.

"I doubt that partners will feel good about Bill [Amelio] taking the reins, even on an interim basis," the source said. "Lenovo was, and is, one of the worst-run companies in the industry."

But the second Avnet spokeswoman said Amelio's expertise will be critical in driving growth in the distributor's partner community and improving overall business execution across the company.

Amelio will earn a prorated base salary of $850,000 annually and be eligible for a bonus of up to 100 percent of his base compensation, according to a filing with the U.S. Securities and Exchange Commission (SEC). He also received an award of stock options and restricted stock units (RSU) worth a total of $2 million, and will be reimbursed for reasonable commuting expenses during his time as CEO.

The company's stock fell 5.9 percent Monday to close at $38.80 per share.

The president of Unique Digital, a Houston-based solution provider, said its biggest problem with Avnet has been high turnover, coupled with a long time lag in training replacements.

Andy Pratt said he would like Avnet to add "co-pilots" for all its partner-facing staff with nearly equal knowledge of the company's product lines and some level of contact with solution providers. Pratt said such a setup would result in far less disruption in the event of departures from Avnet's partner-facing staff.

"We are not going to know for several months if Amelio can change the things that need to be changed," Pratt said.

Other Avnet partners told CRN that they're using the distributor far less than in the past due to the growing popularity of cloud and Platform-as-a-Service (PaaS) business models.

"The model has changed and cloud computing has disrupted the reseller-provider model," said Wayne Scarano, president and chief technology officer of Hillsborough, N.J.-based SGA Cyber Security. "The middlemen are redundant."